Question

Complete the following table. Given the premium, strike price and futures price, is the futures contract in or out of the money? How much is the intrinsic value? How much is the time value? Please show your work.

Strike Price	Futures Contract	Option	Premium	Futures Price	In, out, at the money	Intrinsic Value	Time Value
400	May 20 corn	Put	14’0	406’4
260	Jul 20 Oats	Call	35’0	284’0
124	Apr 20 Live Cattle	Put	7.125	120.950
900	Mar 20 Soybeans	Call	70’0	959’2
900	Mar 20 Soybeans	Put	10’0	959’2
300	Jan 20 Soybean Meal	Put	3.40	310.30
300	Jan 20 Soybean Meal	Call	14.55	310.30

Answer 1

Strike Price	Futures Contract	Option	Premium	Futures Price	In,Out, At the money	Intrinsic Value	Time Value
400	May 20 corn	Put	14	406.4	Out of the money by 6.4	0	14
260	Jul 20 Oats	Call	35	284	In the money by 24	24	11
124	Apr 20 Live Cattle	Put	7.125	120.95	In the money by 3.05	3.05	4.075
900	Mar 20 Soyabeans	Call	70	959.2	In the money by 59.2	59.2	10.8
900	Mar 20 Soyabeans	Put	10	959.2	Out of the money by 59.2	0	10
300	Jan 20 Soyabean Meal	Put	3.4	310.3	Out of the money by 10.3	0	3.4
300	Jan 20 Soyabean Meal	Call	14.55	310.3	In the money by 10.3	10.3	4.25

                          
                          
In the Money - This scenario is when you are profitable at the moment by purchasing the option/future.                          
Out of the Money - This scenario is when you are at loss at the moment by purchasing the option/Future.                          
At the Money - This scenario is when you are at neither profit or loss at the moment by purchasing the option/future.                           
                          
Intrinsic Value - is the difference between the strike price and the Current price. Intrinsic value cannot be negative.                           
   For all out of the money options/future, the intrinsic value is always zero.                       
                          
Time Value of money - Time value is the difference between the Premium and the Intrinsic value